Stocks creep higher as Iranian tensions are off the boil

The markets were volatile today on account of the Iranian attacks on Iraqi bases – that often house US military personnel. The strikes were a retaliation for the killing of a military commander by the US last week. The Iranian government hinted that it is not interested in a full-scale war with the US. Tensions might be on the cusp of deescalating, and we have seen some confidence come back into stocks.

Anglo American have made a generous offer to buy Sirius Minerals, which has caused the Sirius share price to rocket. Anglo’s offer of 5.5p per share for the troubled company represents a 34.1% premium on yesterday’s closing price. No company wants to be snapped up near their all-time lows, but then again Sirius have major funding issues, and without fresh capital from the likes of Anglo, the group will remain at a standstill in terms of progress. It is possible the potash company might seek to extract a higher offer from Anglo American as a way of recouping of severe losses the share price suffered recently.

Greggs’ share price underwent some volatility today on the back of a mixed update. Shortly after the market open, the share price hit a record-high on the news the company upped its profit guidance. In addition to that, Greggs confirmed that total sales increased by 13.5%, which was an improvement on the 7.2% rise registered in the previous year. The company cautioned about higher costs, which sparked a turnaround in sentiment.

Sainsbury’s confirmed that third-quarter total sales slipped by 0.7%, which undershot the 0.3% decline the market was expecting. Grocery sales increased by 0.4%, and this highlights the competitiveness of the sector. The clothing division saw sales rise by 4.4%, but the general merchandise unit revealed a 3.9% decline in sales. From an operational point of view the company made progress as 20% of total sales were carried out online. E-commerce is gaining momentum so Sainsbury’s needs to keep up with the trend.

US

The mood on Wall Street is muted as the major indices are showing modest gains, and keep in mind the index futures were nursing massive losses overnight in the wake of the Iranian strikes. The prospect of a war appears to have diminished seeing as Iran said they would halt military action, provided the US doesn’t respond. This has acted as a slight green signal to some buyers.

The ADP employment report showed that 202,000 jobs were created last month, which hammered the 160,000 estimate of economists. In addition to that, the November report was revised higher to 124,000, from 67,000. The update was a double victory as the headline was strong, and the revision was respectable too.

Walgreens Boots Alliance shares are in the red as first-quarter EPS was $1.37, while the consensus estimate was $1.41. The company continues to feel the pain in respect of lower payments from insurers. The group has been undergoing a cost cutting scheme for over one year in a bid to deal with the challenges of the sector. Despite the not-so-hot quarterly update, the company maintained its full-year outlook. The stock is down 6%.

Macy’s confirmed it trimmed its head count at the Bloomingdales operation. The group will reveal more job cuts next month, and the move is a part of the wider restructuring plan.

Boeing shares are slightly lower this afternoon on the back of the Ukrainian International Airlines disaster, where a Boeing 737-800 crashed killing nearly 200 people. The aircraft manufacturer has suffered enormous reputational damage due to the two 737 Max disasters. There are questions being asked about the Ukrainian flight as to why the aircraft crashed, as it is possible there wasn’t a fault with the aircraft.

FX

The dollar index hit its highest level in 2020, but keep in mind it fell to a five month low on New Year’s Eve, so it would seem that some bargain hunting is taking place. The upward move in the greenback has dented EUR/USD. The dreadful German industrial orders report impacted the euro too. The reading showed a decline of 1.3% - the weakest in four months. GBP/USD has held up better on account of the broadly positive move in the pound. The Halifax house price index registered growth of 1.7% last month, and keep in mind that economists were expecting a fall of 0.2%

Commodities

Gold surged beyond the $1,600 mark in the early hours today on the back of the news that Iran attacked Iraqi bases. The metal cooled off on the back of the language used by the Iranian government – where they suggested they were not pushing for an all-out war. The metal is now trading in the $1,570 region.

Oil is now in the red as the sentiment in relation to Iran has cooled, and the Energy Information Administration report added to the downward pressure. The update showed that oil stockpiles actually rose by 1.16 million barrels, while traders were anticipating a drop of 3.5 million barrels. The gasoline report did the damaged to the energy market as inventories jumped by more than 9 million barrels. The updates suggest that demand in the US is weak.

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